The Ultimate Budget Guide for Freelancers: Learning When to Save and When to Splurge

The Ultimate Budget Guide for Freelancers: Learning When to Save and When to Splurge

Over 57.3 million Americans currently engage in some form of freelance work, and research shows that the majority of workers will freelance by 2027.

For a new freelancer, it can be scary to navigate money and create an effective budget guide when your income isn’t always steady.

Fortunately, we’ve got the guide to help you learn how to manage your money- and splurge with ease.

Let’s get to it!

Track Your Money

This is the first step for all freelancers, and it may be the most important step of all. You need to know where your money is going! And, no, that doesn’t just mean checking your bank account “every so often” to make sure that you’re in the clear.

To actually make an effective budget guide, you need to know how much you’re spending and how much you’re saving.

Are you spending too much on groceries each month? Too much on eating takeout? Too much on little impulse buys that don’t feel like much of anything- until you add them up?

Fortunately, today it’s easier than ever to track your personal finance and create a budget guide. You don’t even need pen and paper. With free money management apps, such as Mint or Personal Capital, you can simply link your bank accounts and credit cards and view all your transactions.

These apps can provide an overview to see how much income you’re actually making (in proportion to how much you’re spending).

If you’re a freelancer, you already know that your money won’t necessarily be predictable. Apps like these can help you predict the downturns and plan accordingly for them.

Build an Emergency Fund

If you don’t already have one, you need a solid nest egg (at least 1-2 month’s income) for unplanned expenses that may arise.

In fact, most financial experts recommend having at least 6-12 months of take-home pay saved in a savings account, but you definitely need to start somewhere.

Consider keeping your money in a high-yield savings account where you’ll accrue interest for just keeping it parked there.

And, remember: this is your emergency fund. You only pull from it when an actual emergency happens. Only you can really define what that means, but it’s a fund designed to protect you in extremely dire times- not when you just want a bit of extra cash.

There are always options available if your emergency fund runs dry, but if you can avoid the unnecessary stress, that’s usually most optimal.

Organize Your Spending

Now that you know where your money is going, you need to figure out how to create a budget guide that honors the inconsistencies that are common with freelance income.

Many financial gurus recommend starting with the 50/30/20 budget. With this model, you’re aiming to spend 50% of your income on basic needs.

These include:

  • Rent or mortgage
  • Car payment
  • Insurance
  • Groceries
  • Transportation
  • Medical bills

The other 30% can then be devoted to your wants, hobbies, and priorities. These can include anything from:

  • Gym memberships
  • Restaurant expenses
  • Clothing
  • Hobbies and entertainment
  • Travel

Finally, it’s ideal to use your 20% for paying down any debts and saving for retirement.

With that said, these aren’t hard numbers, and you may want to tweak them to fit your budget guide in a way that makes sense for your lifestyle.

If you’re in extreme debt, you’ll probably want to cut your “extra 30%” down. Experts recommend you don’t reduce it altogether! Everyone needs that small indulgence, whether it’s a browse through Shop Three Wishes Online Store or a special date night with your significant other.

On the other hand, if you’re looking to retire early, you’ll want to amp up your savings. Evaluate your priorities and plan accordingly.

Stay On Top of Invoicing

As a freelancer, you don’t just have the luxury of getting paid biweekly at a predictable time. Typically, you’ll be using invoicing with your clients.

In general, it’s a good rule of thumb to set up an invoice system and an appropriate billing period for your clients. You can use professional software to do this or make your own invoices.

Doing this will provide you with a peace of mind since you can anticipate when you’ll receive your payment. Just be sure to clearly state your terms and conditions beforehand.

After all, you want your clients to know when and how to prepare your money- and by what date they need to send it.

Splurge on the Right Things

Now you know that creating an effective budget guide entails saving money and budgeting appropriately.

With that said, it’s also important to know how and when to spend money! After all, as a freelancer, you’re not necessarily “given” the tools or equipment to succeed. You need to purchase them yourself.

Consider the following investments:

Professional Memberships

Depending on your specific industry or niche, joining a professional membership can provide you with valuable access to contract databases and networking opportunities. These memberships may even “pay” for themselves with the clients and leads that you land through such connections.

Creative Digital Marketing

You know that saying, it’s not what you know, it’s who you know. In today’s day and age, it’s more like it’s not who you know; it’s what your website looks like.

What does that mean for you? It means that you need to have a standout website and marketing campaign. You can do this yourself, but it may be worthwhile to consider outsourcing these complex tasks to the pros. After all, if you spend all your time trying to decipher SEO, you may end up wasting precious time that you could be spending on your own freelancing.

Secure Software

When you’re working on your own, you can’t just call up the IT desk at the office next door. You need to tap into your own resources.

In general, buying software to serve as a backup system will get the job done. It’s important to protect your business’s data and your clients’ sensitive information. With all the data breaches happening today, this isn’t a risk worth taking as you draw up your budget guide.

Clothing

If you just work at home, you can work in your pajamas, right? You probably don’t need a ton of fancy suits or jackets.

However, many freelancing businesses thrive on meeting clients face-to-face, and you want to look as professional as possible during these interactions.

Fortunately, you don’t need a whole new wardrobe. Consider investing in a few quality items and taking really good care of them.

Office Furniture

If you work at home, you want your office to be functional, inspiring, and productive. If you’re all crammed in a messy room with dim lighting and clutter everywhere, are you really going to feel creative? Probably not.

No, you don’t need to blow your entire budget guide here. But consider buying a desk you love and make sure that you splurge on a few nice office decorations (plants work great!).

Don’t neglect the computer chair, either. Chances are, you’ll be spending several hours sitting in it, and you want to make sure that you are comfortable.

Virtual Assistants or Employees

If your freelance business is booming, some extra help may be needed in your budget guide. After all, we can’t just do everything on our own, and some of the most successful freelancers have several people helping them behind the scenes.

Virtual assistants can be great for social media marketing, organizing, scheduling, and pulling different resources and information.

You may also want to consider adding on another employee- especially if you are finding yourself burnt out or spread too thin. This will allow you to expand your work without overwhelming yourself with too many tasks.

Good Internet

If you’re in the freelancing business, having fast and reliable Internet goes without saying. If you have slow or spotty connections, consider switching providers.

This will save you all the headaches that come from reloading pages (so much time spent!) and give you more time to work on the projects ahead of you.

Plus, you’ll be able to stream Netflix better (for when you’re taking those much-needed breaks). And, it’s a tax write-off, so it’s a win-win for everyone!

Final Thoughts on Your Freelancing Budget Guide

The world of freelancing can be as exciting as it is overwhelming. With the proper planning, you’ll be on top of your finances in no time at all.

Interested in more useful guides and tips on making it as a successful freelancer? Be sure to check out our blog today.